The ConnectedEconomy has created new dynamics for every segment of payments and commerce from small- to medium-sized business (SMB) retail to big box mass merchants to venture capitalists.
And for retailers, it has become a competitive flashpoint. PYMNTS Global Shopping Index research, for example, shows that SMB retailers suffer from not being connected digitally. They are less likely to offer digital payments options and therefore score lower than large firms in terms of customer satisfaction. However, connected, omnichannel SMBs — those that sell via online channels but make most of their sales in stores — perform as well as large stores in consumer satisfaction. Twenty-six percent of these SMBs are top performers, approximately the same share as large stores.
As retailers both large and small begin to entice consumers back to their bricks-and-mortar locations, Jennifer Fleiss, managing partner at Volition Capital and co-founder of Rent the Runway, said payments and digital-first technology can play a role in creating what she called an omnichannel 2.0 business model.
Fleiss told PYMNTS CEO Karen Webster that in addition to looking for a growth factor of 50 percent year over year, one of the key things she looks for when searching for a new company for Volition’s investment is that the organization has a firm grasp on the connected economy via omnichannel operations, especially after the changes brought about by the pandemic.
“Sometimes I think of it as omnichannel 2.0,” she said. “COVID certainly showed us that having both a digital component and … a physical component can still be very helpful. But in addition to that, you have to have conversational commerce.”
Such commerce includes newly emerging retail concepts like video shopping, in which someone with a similar build to a consumer can try on clothes via a web feed, or someone with similar skin tone can try on makeup, she said.
Payments can be a relationship-building part of a company’s omnichannel growth strategy, Fleiss said. She pointed to the way in which Venmo has created a community around payments by adding a social component to the mix, or the way exercise bike company Peloton was able to unlock new consumer bases by bringing an installment structure to its payment cycle.
“I think you’re also seeing the world of payments and financing enter more and more categories as more businesses start to vertically integrate,” she said. “I’ve seen it in the healthcare space where companies are thinking about how they play into the financing element.”
Embracing an omnichannel approach works even more effectively in the connected economy when flexible payments are embedded at its core. Fleiss said a digital-first approach can open the door to not only more success, but more entrepreneurial thinking. But retail has taken longer to embrace this way of thinking than tech-first businesses, such as digital health and exercise companies that were pushed to accelerate due to the pandemic effect. The sheer interconnected infrastructure of some retailers has made it hard for them to pivot. But the fact that consumers were also pushed to change their thinking during the pandemic has made the retail field ripe for this kind of tech-forward expansion.
Sustainability
Another component Fleiss said she keeps front-of-mind when searching for a new company to add to Volition’s portfolio is its emphasis on sustainability.
“I think just everyone’s eye and mind is on how they can contribute to making the world a more sustainable place,” she said. “And whereas we’ve seen it through organic vegetables and fruits and sustainably minded cleaning products, et cetera, I think now we’re also seeing businesses that are engaging the consumer to be responsible for the world around us.”
This growing focus on sustainability has the potential to pull the market into two different directions, she said. One is based on efficiency for run-of-the-mill consumables like paper towels and laundry detergent, and the other based on community, personality and creativity. There is room for both types of businesses to exist, naturally, but Fleiss said ease of payments is critical to facilitate the latter. Providing checkout experiences that are fast, easy and flexible will enable consumers to visit multiple sites to make purchases based on loyalty and sustainability, rather than simply staying on one site because managing one cart or payment transaction is simply easier than shopping at different retailers, each with their own checkout process.
Finally, Fleiss said she believes that simply listening to the market and remaining flexible enough to let it lead is a critical component of any successful connected economy business. As an example, she brought up her time with Rent the Runway. While there, the company discovered that women were stopping in after work and using the company as something of an upscale locker room — changing out of their business clothes and into evening wear. As a result, the company began putting out more hair tools and offering other ways for their customers to freshen up for a night out.
“It’s actually something I’m really passionate about,” she said. “You know, I think the best businesses are built when you listen to consumers and you never stop listening. So, no matter how big you grow, you find — whether it’s taking customer service calls or going into a physical store if you have one — ways to look and observe your consumer. Our world is moving so quickly that it’s impossible to keep pace, unless you’re always on the front lines, having a pulse on the consumer.”
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